Commentary

OPINION Meeting supply chain challenges in an era of complex demand

Nick Everitt, director of advisory EMEA for Edge by Ascential, draws on research and case studies to explain how  retailers can deal with the growing supply chain complexity.

Scarcity used to be a sign of desirability. Although Apple can still generate sufficient hype for customers to wait weeks for the latest iPhone, this is very much the exception to the rule. Instant gratification is the name of the game and if you can’t fulfil customer demand immediately, you’re unlikely to have a customer, full stop.

Jill McDonald, who spent two years as Marks & Spencer’s managing director of clothing, home and beauty, is a recent casualty of stock syndrome for failing to keep the hugely popular Holly Willoughby denim range on the rails. The lack of supply, with some stores seeing no replenished stock for up to a month, was so dramatic as to be termed ‘jeansgate’.

Savvy retailers know that the supply chain is at the heart of meeting consumer expectations and that they must keep on top of each emerging innovation if they’re to stay competitive. With customers shopping across channels and completing purchases on multiple different platforms, including in the real world, the next-generation supply chain will need to be versatile with multiple fulfilment options.

The need to master the delivery cycle isn’t going to go away as the ecommerce channel continues its inexorable march on bricks and mortar. At Edge by Ascential we expect the former to make up 30% of all global chain retail sales by 2024.  At the same time, the supply chain will fragment even further with the growth of new routes to the consumer, such as third-party marketplaces, direct to consumer (D2C) and last-mile delivery intermediaries (such as Instacart or Uber Eats). A new set of supply chain capabilities are certainly required.

The new supply chain has to be reliable and responsive and, as a result, we identified the four characteristics of next-generation fulfilment: Automated, Agile, Promiseable and Real-Time. Examples of the next-generation supply chain are already out there.

JD.com opened its first fully automated warehouse in Shanghai and launched robot delivery vehicles in Beijing. It is agile because it manages fresh delivery through its cold chain delivery network and uses blockchain to provide customers with trustworthy product information.

The company is also working with Walmart to analyse stock system data to determine whether a Walmart store or JD warehouse is closer to the customer, allowing it to change source in real-time and improve delivery times. Speed doesn’t mean mistakes, however, as its advanced logistics expertise means JD.com can handle 90% of orders with same or next-day delivery, which is highly promiseable.

But to achieve this degree of seamlessness requires a huge amount of work behind the scenes. It’s not enough to hand it over to the robots and data management systems and hope all will go to plan.

Next generation supply chain is hugely dependent on organisational alignment and it needs to be represented within the leadership team. Silos need to go, as does the perception that supply chain is a cost centre, rather than a driver of growth. Supply chain is affected by nearly all aspects of a supplier’s business, so communication between teams and alignment on strategy is crucial.

When we refer to automated, agile, promiseable and real-Time as making up the next-generation of supply chain, we’re really just scratching the surface. These will continue to be at the heart of fulfilment innovation, but interconnectedness and a drive towards even greater efficiency will be central to the future supply chain.

By 2030, we can expect to see even greater technological transformation, including robotics and 3D printing, which will fuel product development and packaging. A logistical model that includes floating warehouses and autonomous vehicles will be able to support the demands of a growing online retail segment. We expect AI to begin forecasting inventory demand, meaning the end of over-supply and stock shortages; it will also be instrumental in plotting ever more efficient delivery routes, saving dispatch staff time and effort, as well as cutting down on fuel and pollutants.

Supply chain may not have the glamour of marketing or brand building, but it is certainly as important when it comes to customer satisfaction and loyalty. Anything that can help companies deliver better, and faster, is worth more than a second look. Automation and robotics are not imminent, they are already streamlining back end systems and processes. Customers are going to continue to present challenges to retailers by buying through ever more complex channels with ever more complex fulfilment demands.

The winning retailers of tomorrow are already investing in their supply chain, recognising it is a competitive advantage and not just a cost centre.

 

 

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